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2024 (9) TMI 365 - AT - Income TaxDeduction under the provisions of section 80P(2)(d) - interest income was earned on deposits made with a Cooperative Banks - HELD THAT - On perusal of provisions of section 80P(2)(d), it is clear that the income derived by a cooperative society from its investment held with other cooperative societies shall be exempt from the total income of a cooperative society. Therefore, what is relevant for claiming of deduction u/s 80P(2)(d) is that interest income should have been derived from the investment made by the assessee cooperative society with any other cooperative society. This issue was considered by the Hon ble Karnataka High Court in the case of CIT vs. Totagars Cooperative Sale Society 2017 (1) TMI 1100 - KARNATAKA HIGH COURT wherein after referring to the decision of Totgar s Co-operative Sale Society Ltd 2010 (2) TMI 3 - SUPREME COURT held that the ratio of decision of the Hon ble Supreme Court is not to be applicable in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act. The interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks qualify for deduction under the provisions of section 80P(2)(d) - grounds of appeal raised by the appellant society stand allowed. Appeal filed by the appellant is allowed.
Issues:
1. Delay in filing appeal before the National Faceless Appeal Centre (NFAC) and refusal to condone the delay. 2. Interpretation of provisions of section 80P(2)(d) of the Income-tax Act, 1961 regarding exemption of interest income earned by a cooperative society from investments with other cooperative societies. Analysis: Issue 1: Delay in filing appeal before NFAC and refusal to condone the delay The appellant, a Consumer Cooperative Credit Society, filed an appeal against the assessment order passed by the Assessing Officer (AO) under section 143(3) r.w.s.144B of the Act, bringing to tax interest income earned on deposits with a Cooperative bank. The appeal was filed with a delay of 90 days, citing the distance of the society from the District Headquarter as the reason for the delay. The NFAC refused to condone the delay, relying on the statutory provisions of section 5 of the Limitation Act, 1963, and judicial precedents such as N. Balakrishna V. M. Krishnamurthy AIR 1998 SC 3222. The Tribunal held that the NFAC erred in not considering the explanation tendered by the appellant society as a "sufficient cause" for the delay. The Tribunal emphasized that the cause for delay, not the length of delay, should be the determining factor for condonation. Consequently, the Tribunal opined that the delay of 90 days should have been condoned, allowing the appeal to be adjudicated on merits. Issue 2: Interpretation of section 80P(2)(d) regarding exemption of interest income The Tribunal examined whether the interest income earned by the cooperative society on deposits with Cooperative banks qualified for deduction under section 80P(2)(d) of the Act. Referring to the provisions of section 80P(2)(d), the Tribunal noted that income derived by a cooperative society from investments held with other cooperative societies is exempt. Citing the decision of the Hon'ble Karnataka High Court in CIT vs. Totagars Cooperative Sale Society, the Tribunal concluded that interest income on deposits made with cooperative banks falls under the purview of section 80P(2)(d) and not section 80P(2)(a)(i). Therefore, the Tribunal allowed the appeal, holding that the interest income earned by the cooperative society on deposits with cooperative banks qualified for deduction under section 80P(2)(d). In conclusion, the Tribunal allowed the appeal, emphasizing the correct interpretation of section 80P(2)(d) and the importance of considering the cause for delay in filing appeals before the NFAC.
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